In-Depth Look: The Economics of Nepotism
🤝 Family Ties and Power Plays Shape Modern Governance
Good morning 👋
It’s Thursday, August 15, and welcome to another edition of our Deep Dive series 🌍
Today, we’re uncovering the intricate web of nepotism, hereditary democracy, and cronyism, with a spotlight on Southeast Asia and beyond. Buckle up as we explore how these forces shape global politics and business, from the corridors of power in Manila to the boardrooms of Amman.
“Nepotism continues to thrive mainly because people in those groups don't question it deeply.”
👀 Nepotism, the practice of favouring relatives or friends in professional settings, is often viewed negatively. However, its persistence across various sectors—from politics to business—suggests a deeper, more complex role in our social and economic fabric. This piece will critically examine the psychological, cultural, and economic forces that normalise nepotism and why it continues to thrive despite its conflicts with meritocratic ideals.
💭 The Normalisation of Nepotism: A Psychological Perspective
Nepotism endures not because it benefits society as a whole, but because it often goes unquestioned within communities and organisations where it takes root. The human tendency to trust and support those we are closely connected with is deeply embedded in social behaviour.
This natural inclination, coupled with a lack of scrutiny, allows nepotism to become a normalised practice within cultures and institutions. When people fail to critically evaluate the consequences of favouritism, it becomes ingrained and perpetuates itself over generations.
🔑 Key Points:
Human Capital Transfer: The familial transfer of skills and opportunities is often justified as an efficient means of preserving human capital within families, particularly in industries where knowledge is traditionally passed down through generations.
Perceived Loyalty and Trust: Hiring relatives or close friends is often perceived as a guarantee of loyalty and trust, particularly in high-stakes environments like politics and business.
Cultural Reinforcement: In many cultures, nepotism is normalised and even expected as part of societal norms, further entrenching it as an acceptable practice.
✍🏻 Case Studies: Nepotism Across Different Geopolitical Regions
In Southeast Asia and the Middle East, nepotism is deeply intertwined with cultural norms and expectations. Family loyalty is paramount, and securing jobs for relatives is seen more as a duty than an unethical act.
🇮🇩 Indonesia— Nepotism is not only prevalent but also deeply embedded in both political and business landscapes. In many Indonesian companies, particularly those family-owned, positions of power are often passed down through generations.
This practice is frequently rationalised as a means of preserving family honour and continuity.
The concentration of wealth and power in the hands of a few families has led to significant social inequality and stifled economic mobility.
🇸🇦 Saudi Arabia— Nepotism is a norm in both public and private sectors, justified by the tribal culture that values familial ties above merit. This has resulted in a concentration of power within a few families, limiting opportunities for those outside these elite circles.
In Europe, perceptions of nepotism vary significantly across regions. While it is often condemned in Western Europe, it remains a pervasive issue in some Eastern European countries.
🇮🇹 Italy: Nepotism is rampant in politics and academia, where family connections frequently open doors to prestigious positions. This has led to public discontent and calls for reforms, yet the practice persists, deeply rooted in the country’s social fabric.
🇭🇺 Hungary: In Hungary, nepotism is particularly pronounced in public administration, where familial ties often dictate hiring decisions. This has led to widespread corruption and inefficiency in the government, undermining public trust.
In the US, nepotism is often seen as antithetical to the American Dream of meritocracy. However, it remains prevalent in certain industries, particularly in family-owned businesses and Hollywood.
🎬 Hollywood: The #nepobaby trend has brought attention to the dominance of children of famous actors in the industry, sparking debates about fairness and merit. Despite public outcry, the practice persists, with industry insiders often defending it as a natural outcome of a closely-knit industry.
💼 Corporate America: While many companies have anti-nepotism policies, family ties still play a significant role in hiring decisions, especially at the executive level. This has led to criticism that corporate America often prioritises connections over qualifications.
🗳️ Hereditary Democracy: The Intersection of Nepotism and Politics
In an era where "nepo babies" face criticism for their perceived unfair advantages, voters around the world continue to elect leaders with familial ties to power. This phenomenon, known as hereditary democracy, is not confined to autocracies; it is one of the most common—and underappreciated—features of democracies worldwide.
👉 Global Examples of Hereditary Democracy:
🇨🇦 Canada: Justin Trudeau, the son of former Prime Minister Pierre Trudeau, serves as a prominent example of hereditary democracy in a modern context. His rise to power, despite being elected democratically, has sparked debates about the role of political dynasties in Canada.
🇺🇸 United States: The Bush family, with George H. W. Bush and his son George W. Bush both serving as US Presidents, illustrates the influence of familial ties in American politics. This pattern of political dynasties raises questions about the fairness and representativeness of American democracy.
🇵🇭 Philippines: Ferdinand "Bongbong" Marcos Jr., son of the former dictator Ferdinand Marcos, was elected as President, demonstrating the persistence of political dynasties in the Philippines. His election highlights the enduring influence of familial connections in shaping the country’s political landscape.
🇮🇩 Indonesia: In Indonesia, the practice of hereditary democracy is entrenched in the political system. Families with deep political connections often dominate local and national elections. For example, the Sukarno and Suharto families have maintained significant influence in Indonesian politics long after the fall of their regimes. This has led to concerns about the stifling of political competition and the perpetuation of corruption.
🇧🇩 Bangladesh: The recently ousted Prime Minister Sheikh Hasina, who followed in the footsteps of her father, Sheikh Mujibur Rahman, exemplifies hereditary democracy in Bangladesh. This practice has cemented political power within a few families, raising concerns about democratic integrity.
🔎 Key Findings:
Hereditary Democracies vs. Autocracies:
A recent study highlights that hereditary democracies outnumber hereditary autocracies.
In 2024, more heads of government in democracies had parents who were also heads of government than in autocratic countries.
Impact on Political Systems:
Hereditary democracy is fundamentally unfair and detrimental to political systems.
By limiting political office to those with family connections, it increases the likelihood of mediocre leaders rising to power and perpetuates a cycle of nepotism.
Voter Expectations:
Voters often elect relatives of prominent politicians, assuming continuity in leadership style or policy positions.
However, this can lead to disappointment when elected heirs diverge significantly from their predecessors, resulting in poor representation and unmet expectations.
Women in Leadership:
Despite its drawbacks, hereditary democracy has facilitated the rise of women leaders in countries like India, Sri Lanka, Bangladesh, Pakistan, and Indonesia—often decades before their Western counterparts.
This has been one of the few positive outcomes of political dynasties, although it does not mitigate the broader issues of fairness and representation.
As of June 2024, eleven of the world's democracies have heads of government whose fathers or husbands were heads of government before them, illustrating the widespread nature of this phenomenon.
In Japan, where hereditary democracy is deeply entrenched, the tradition of politics as a family business continues to thrive, often at the expense of political innovation and reform.
🧠 Cognitive and Cultural Justifications
The continued prevalence of nepotism and hereditary democracy can be attributed to deeply ingrained cognitive biases and cultural norms that favour familiarity and continuity over merit.
➡️ Cognitive Biases
In-Group Preference: Humans are naturally inclined to favour those within their social group, which often includes family members and close associates.
This bias is evident in hiring and election decisions, where familiarity is often equated with competence. For instance, in family-run businesses, owners may prefer to pass on leadership roles to their children, believing that they are better suited to uphold the family’s values and legacy.
Loss Aversion: In times of economic or political uncertainty, people may gravitate towards familiar faces to ensure stability.
This is particularly true in politics, where voters may choose candidates with recognisable names, even if their policies differ from those of their predecessors. This desire to avoid potential losses by sticking with the known can perpetuate nepotism and hereditary democracy.
➡️ Cultural Norms
Familial Duty: In many cultures, particularly in Asia and the Middle East, there is a strong sense of obligation to support one’s family, which often manifests in nepotistic practices. In these regions, providing jobs or opportunities to relatives is seen not only as acceptable but as a moral duty, reinforcing the cycle of nepotism.
Societal Expectations: In societies where hereditary democracy is entrenched, going against this norm can be seen as socially unacceptable. For instance, in Japan, the expectation that political power will be passed down within families is so strong that candidates without such connections often struggle to gain traction.
🚀 Conclusion: The Path Forward
Nepotism and hereditary democracy are complex issues deeply intertwined with human psychology, cultural norms, and economic structures. While they offer certain benefits, such as trust and continuity, their drawbacks—particularly in terms of fairness, innovation, and the democratic process—are significant.
To move toward a more equitable society, it is essential to address the cognitive and cultural factors that perpetuate these practices.
Promote Meritocracy: Organisations and political systems should implement policies that prioritise merit-based hiring, promotions, and elections.
For example, strict anti-nepotism regulations can help ensure that positions are awarded based on merit rather than connections.
Cultural Change: Societies need to critically examine and challenge cultural norms that sustain nepotism and hereditary democracy.
Public awareness campaigns and education can play a vital role in shifting societal perceptions towards valuing fairness and equality.
Transparency and Accountability: Ensuring transparency in hiring, promotion, and election processes is crucial.
This can include public disclosure of family ties in political candidacies or mandatory external reviews in hiring decisions, helping to mitigate the negative impacts of nepotism and hereditary democracy.
As we navigate these complexities, the broader economic and political implications of nepotism and hereditary democracy come into sharper focus. Analysts suggest that these entrenched practices may not only shape the immediate economic landscape but could also influence long-term governance and societal structures across regions.
👉 The true test lies in how these dynamics will affect global economic competitiveness and the evolution of democratic principles, potentially redefining the balance of power and influence in the years to come.